You'll Never Guess Where The New Centers Of Innovation Are

In the last ten days, two important reports have been released that should make people optimistic about the future of the American economy. The first was a report by the Science Coalition, a group of American research universities that highlighted over 100 companies created by federally funded research. The second report was from the White House and US Department of Commerce about the growing importance of innovation and entrepreneurship to American universities – as an academic, research and economic objective of the university. In full disclosure, I produced the US Department of Commerce report in 2012, although I have since left the Obama Administration.

To quote from the White House report’s introduction,"…as global competition continues to grow, it is critical that the institutions driving innovation improve their ability to develop products and services with market relevance and economic value. Historically, a large portion of America’s investments in innovative companies have been centered in the metropolitan regions of San Francisco/Silicon Valley,
CA; Greater Boston, MA; New York/New Jersey; Austin, TX; Seattle, WA; Washington D.C., and San Diego, CA. However, universities outside of these areas are now leading the charge to model new entrepreneurial ecosystems. This is best exemplified by the University of Michigan’s efforts in Michigan, Arizona State University’s impact in the Phoenix area, and the University of Southern California’s efforts in the Los Angeles area." The two reports are linked to this page.

We now know of over 500 colleges and universities around the United States that have launched entrepreneurship programs. These range from major research universities to community colleges, HBCU’s and regional state colleges. Indeed, the impetus for the White House report came from an initial appeal by the Presidents of 142 research universities to the US Secretary of Commerce to support research commercialization and entrepreneurship. This appeal was followed by a similar appeal by 170 community colleges.

The most obvious driver of this effort is the exploding interest in entrepreneurship among Millenial’s. Indeed, a report by Youth Pulse, supported by the Kauffmann Foundation, claims that 42% of today’s Millenial’s would like to start their own business or non-profit. So universities are adapting – launching stage-gated business plan competitions, creating buildings that have accelerators and entrepreneur-only student housing, and raising millions for the winners of their business plan competitions. Additionally, universities view entrepreneurship as a necessary career option to provide to students – particularly given the current job market.

University President’s and Trustees increasingly see research commercialization and entrepreneurial spinoffs as a core part of their contribution to their local economies. As regions around the country look to join or expand their participation in the innovation economy, they are looking to their local universities as the leading (and sometimes only) source of innovation in their regions. Universities also understand the economic and emotional ties they have to a region, and want to help make their regions intellectually and economically vibrant in order to attract the best students, faculty, corporate partners and alumni.

Lastly, we are seeing research commercialization become more accepted among faculty. Among younger faculty, this is driven by a desire to find relevance in their research, and the opportunity to economically benefit from their expertise. It has also been driven by the availability of funds for commercialization provided by entrepreneurship and technology transfer centers on campuses.

President Obama, and his successor should continue efforts to increase research commercialization. Currently about 37% of our federal research budget (of about $150 billion), goes to universities. This year, Congress will reauthorize the America Competes Act, which, in the past, has allowed federal agencies to conduct prize challenges, and made it easier for universities to commercialize research. This year, ACA and the Startup 3.0 Act, both advocate for America’s research agencies, such as the National Institute of Health and the National Science Foundation, to carve out a small sliver of funding for commercialization. There is also momentum to change the structure of federal commercialization programs like the SBIR and STTR programs to make them easier to access for existing startups and outside of the traditional regions of New England and California. There is a lot of momentum to do this among Democrats and Republicans. In addition, the long, long awaited final rules about crowd funding will be released this year, making it easier for small startups to raise capital.

Developing an entrepreneurial ecosystem does not happen overnight. It requires a culture of idea generation, experimentation, success, failure and access to capital. The efforts by American universities are doing exactly this. They are creating a safe place for students, alumni and local entrepreneurs to generate ideas, recruit mentors, experts and capital, and to experiment with their products, services and technologies. While most of them will fail the first time, many will continue to experiment and create new start-ups, and eventually, the region will begin to see a successful start-up culture develop.